Paying Off Debt 10 Signs You Are Doing It Wrong

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Paying off debt is easy in theory. Simply adjust your budget, reduce spending, and put all your excess money into each of the lined-up debts under your name. But in practice, eliminating debt is a little more complicated than that. Here are 10 signs you’re approaching your debt pay-off plan (or lack thereof) wrong and how you can solve the problem.

You’re Not Making Progress

Planning is a crucial skill in any aspect of financial management. If you don’t plan where your money goes, there’s a high chance it’ll end up going where it shouldn’t. The same goes for debt repayment. You might have the discipline to control your spending and really focus on making those repayments. But if you don’t plan where your money goes, you’ll find that you’re not making progress. 

For example, many make the big mistake of trying to tackle all of their debt at once. But putting small amounts across different loans means that it’ll take far too long to complete one repayment. Being strategic about what debt to pay off first is a tried and true pathway to financial freedom. 

You’re Taking on Extra Loans 

Some people take a low-interest loan to pay off a high-interest loan. This strategy makes sense if the math adds up to an ultimately lower financial burden. What doesn’t make sense is taking a loan when it’s unnecessary. If your income is high enough to cover the debt repayment cost after making some spending adjustments (goodbye, non-essentials!), then there’s likely no reason for you to take on the burden of another loan.

smartphone on top of pink paper

You Keep Forgetting to Make Repayments

Choosing to take on any kind of loan comes with the responsibility of making repayments on time. Otherwise, the interest will keep piling up, eating at your prospective savings and leaving you with very little for day-to-day expenses. Of course, the worst part about not repaying is when your reason is that you forgot to do so.

Statistics show that 1.58% of credit cardholders haven’t made their minimum repayments in 30 days or more. Delinquency has massive effects on your credit, which can make you ineligible for taking a mortgage, vehicle loan, and other big-ticket financial services. So mark those payment deadlines on your calendar—lest you unintentionally hurt your credit.

You’re Not Focusing on The Right Debt 

Most experts suggest tackling debts with the highest interest rate first, as leaving them hanging will force you to keep shelling out money toward interest. But, of course, this route isn’t the only correct solution. Some prefer to tackle a few smaller debts first to get them out of the way and boost morale. Others like to break their debt pay-off strategy down to a science, choosing to alternate between high and low-interest commitments. 

Ultimately, it’s up to you to choose which debt to start with. But if you find that you’re spending more money by working on low-interest loans first, it might be time to shift gears and consider clearing out your high-interest loans with more fervor. Consider using a debt repayment calculator to help you decide the most optimal debt to tackle first. 

You’re Sacrificing Savings 

Being deep into debt is one story. Being deep into debt and not having any savings for the worst-case scenario is another. While paying off debt is certainly a priority, there’s no reason to compromise your entire life over loans. Don’t empty out your savings just to make one or two repayments. And absolutely stay away from your retirement fund—that’s reserved for your future. Instead, find smarter alternatives to afford repayments, such as setting a stricter budget or joining a debt consolidation program.

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You’re Still Wasting All Your Money 

Shopaholics can find it hard to curb their shopping addiction and may default to spending money meant for paying off debt. However, deciding to fix your financial future is all about commitment. And at times, that involves a 180-degree lifestyle change to fit a more compact spending allowance.

Some things you can do to fight against impulsive spending include: 

  • Automatically routing monthly payments from your checking account to the lender. 
  • Finding hobbies to take your mind off of material temptations. 
  • Setting a credit or debit card spending limit.

You’re Jumping From One Debt to Another 

Commitment is a keyword when it comes to paying off debt. While there are times when you might want to change your repayment plan midway after optimizing your strategy, changing things up too many times will only stop you from progressing. A rule of thumb is to choose a debt to finish paying and stick to it. There’s no point in switching to paying for a different debt when you’re already 80% done with the first, as interest rates will pile up and negate your progress. 

woman counting money to pay off debt

You’re Not Getting The Help You Need 

Debt is undoubtedly overwhelming, which is why there’s no reason for you to go through the repayment journey alone—especially when you owe more than you can afford. Financial institutions can help with credit card debt, whether through debt consolidation or balance transfers. 

Likewise, financial advisors are trained to help solve credit issues, so you can turn to them to help you figure out a plan to get you back on your feet. 

You’re Not Checking Your Credit Report

A dollar can make a world of a difference where finances are concerned, which is why you don’t want any mistakes to fall through the cracks. A recent investigation found that about 34% of Americans found at least one error in their credit reports, whether a small typo or a major financial mixup. 

Your credit report, which details your entire financial history, is updated approximately every 45 days. Take the time to go through every detail to ensure that the information is accurate and that you aren’t being forced to pay a higher amount by accident. 

You’re Not Improving Your Financial Situation 

Some people are stuck in jobs that don’t pay enough to cover their day-to-day obligations plus debt. If you find that you’ve been in the same loop for far too long, it may be time to consider changing jobs, shifting career paths, or even taking on a side hustle to cover lapses in your main income. 

This solution is definitely not for everyone, as you might have already tried to improve your finances multiple times with no luck. But if you haven’t given it much thought, consider taking that big leap—it might be the push you need to finally be debt-free. 

From understanding what’s putting your finances in the red to adjusting your lifestyle to accommodate a smaller spending budget, there’s a lot to consider in your debt pay-off journey. So take things one step at a time and stay focused on your goal of becoming debt-free.

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